Not considered a good sign by investors, the pledging of shares by promoters of the 1,517 NSE-listed companies has risen to a seven-year high at Rs2.08 lakh crore with companies like TCS and Cairn India leading the way, says a report by PRIME Database.
"Across all NSE listed companies (including companies with no pledging), the percentage of promoter holding pledged went up from 15.57% a year back to 16% on June 30, 2016 (further increased to 16.21% as on August 11, 2016)," Pranav Haldea, Managing Director of PRIME Database, said.
In value terms, promoters' share pledging went up to Rs 1.98 lakh crore as on June 30, 2016 compared to Rs 1.77 lakh crore as on June 30, 2015 (further increased to Rs 2.08 lakh crore as on August 11, 2016), the report said.
According to Haldea, this can be attributed mainly to the rise in share prices.
The high pledge levels, however, are typically not considered a good sign by the investors as a downturn in the market price can lead to invocation and change in management, he said.
Shares were pledged in as many as 522 companies of the 1,517 NSE-listed companies as on August 11, 2016, with Tata Consultancy Services (TCS), Adani Ports, Cairn India, JSW Steel among the top companies by value of pledged shares.
Surprisingly, there were as many as 31 companies in which the complete holding (100 per cent) of the promoters was under pledge as on June 30, 2016, including Bajaj Hindusthan Sugar, Bharati Defence and Infrastructure, IL and FS Investment Managers, Ind-Swift Laboratories, IVRCL, JMT Auto, MSP Steel and Power, Reliance Defence and Engineering and Visa Steel.
Overall, there were 204 companies in which the percentage of promoter holding pledged increased in this period.
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